Mid-Morning Market Recap: Equities Up, Treasuries Down After ADP and TAF

Market Updates | Written by CEP News | Jul 30 08 14:28 GMT |

(CEP News) - Equities, the U.S. dollar and Treasury yields are continuing their two-day surge after a report on U.S. private employment was much stronger than expected and the Federal Reserve announced new measures to support market liquidity. Payroll company ADP said the U.S. added 9k jobs in July, while economists were expecting job losses of 60k. Economists dismissed the figures as overly optimistic, but markets embraced the positive news. Dow futures jumped 35 points and Treasury yields rose 2-4 basis points across the curve. The U.S. dollar rose 0.2% against the euro, yen and pound sterling. Later, those gains were extended when the Federal Reserve announced it will be conducting a $25 billion, 84-day Term Auction Facility in addition to the $75 billion 28-day facility. The Fed said it is hoping to address the ongoing "fragility" of the financial system. U.S. two-year yields are up 6.5 bps to 2.69%, with five-year yields up 6.5 bps to 3.43%, 10-year yields up 6.5 bps to 4.10% and 30-year yields up 6.4 bps to 4.69%. The Eurodollar March 09 contract is down 3.0 ticks to 96.80. The yield curve is steeper, with the 10/2-year spread up 0.4 bps to 142.03 bps. "The lending facility has hurt the [Treasury] market. The feeling is that it reduces the risk of flight-to-quality but we think that's a mistake. To us, it points out that the problems are going to persist and we take that as a positive for bonds," a Treasury trader in New York said. Yields on two-year Canadian government bonds are up 3.7 bps to 3.10%, with five-year yields up 3.4 bps to 3.39%, 10-year yields up 3.1 bps to 3.82% and 30-year yields up 2.6 bps to 4.17%. The December 08 BAX contract is down 3.0 ticks to 96.85. The Canadian 10-year note is yielding 28.2 bps less than the U.S. 10-year note. In Germany, returns on two-year German bonds are down 0.8 bps to 4.34%, with five-year yields down 2.7 bps to 4.38%, 10-year yields down 3.7 bps to 4.44% and 30-year yields down 3.8 bps to 4.73%. Yields on UK two-year bonds are down 1.5 bps to 4.86%, with five-year yields down 1.7 bps to 4.84%, 10-year yields down 2.4 bps to 4.87% and 30-year yields flat at 4.56%. Toronto's S&P/TSX composite index is up 94 points to 13437, the Dow Jones industrial average is up 142 points to 11540, the S&P 500 is up 14 points to 1278 and the Nasdaq is up 17 points to 2337. European stock markets are also higher, with the Eurostoxx up 49 points to 2889, the UK FTSE 100 up 104 points to 5424 and the German DAX up 88 points to 6486. The Canadian dollar is down 0.0014 to 0.9757 against the U.S. dollar (1.0251 USD/CAD) and up 0.01 to 105.62 against the yen. The U.S. dollar is up 0.16 to 108.26 against the yen and the Dollar Index is up 0.224 to 73.533. The euro is down 0.0039 to 1.5550 against the U.S. dollar, down 0.0019 to 1.5940 against the Canadian dollar, down 0.0016 to 0.7862 against the pound sterling and is lower by 0.17 to 168.35 against the yen. The pound sterling is down 0.0010 to 1.9779 against the U.S. dollar and up 0.0020 to 2.0277 against the Canadian dollar. WTI crude oil is down $0.92 to $121.27. The front month gold contract at the Chicago Board of Trade is down $20.20 to $896.50 per ounce. All data taken at 10:12 a.m. EDT. By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.